Otto Schily said the attack, which was due to take place on November 9, the anniversary of Kristallnacht, the Nazis' infamous anti-Jewish pogrom in 1938, demonstrated a "new quality of terror".

"There have been hints that rightwing extremists are really a great potential danger for our society, and that has been dramatically confirmed," he said.

Mr Schily praised police for moving swiftly last week to arrest the 10, who were all members of the Southern Brotherhood, a neo-Nazi gang based in southern Germany.

The group had allegedly planned to blow up the synagogue during the ceremony which was due to be attended by hundreds of people, including Johannes Rau, Germany's president, and Paul Spiegel, the president of the Central Council of Jews in Germany. In raids last week police seized 1.7kg of TNT, 14kg of suspected explosives, two pistols, grenades and a dagger with a swastika on it. They made several further arrests over the weekend.

Papers carried photographs of the plot's alleged ringleader yesterday. Martin Wiese, 27, unemployed, grew up in East Germany and was known to the authorities.

Günther Beckstein, the Bavarian interior minister, said detectives found a hit list of other targets in Mr Wiese's flat, including several mosques and a Greek school.

Officials conceded over the weekend that far-right groups were a "real and present" danger and should not be trivialised.

"There have always been isolated acts of violence carried out by rightwing extremists. But the preparation of an attack like this, over a period of months, is an alarm signal," said Mr Beckstein.

Mr Spiegel said: "We have been warning for years that anti-Semitism in Germany is growing."

During Kristallnacht, thousands of Jewish businesses and synagogues were van dalised, about 100 Jews were murdered and many thousands were rounded up and deported to concentration camps.

According to official estimates there are more than 10,000 neo-Nazis active in Germany and about 45,000 members of extreme rightwing organisations.

The best-selling newspaper Bild Zeitung referred to the Southern Brotherhood as the Brown Army Faction yesterday and wrote of "Nazi terrorists".

Germany has a history of domestic terrorism dating back to the 1970s when the Red Army Faction, a group of leftwing revolutionaries led by Andreas Baader and Ulrike Meinhof, carried out a series of deadly bomb attacks and kidnappings.

Over the past two years detectives have concentrated on Islamists, after it emerged that three of the September 11 hijackers had lived and studied in Hamburg.

Yesterday, commentators said it was time to think again. "German political terrorism is back," the daily Die Welt said. "Faced with a flood of pictures from the Middle East, we had forgotten what extremists could plan at home."

Before the bomb plot was uncovered, Bavaria had congratulated itself that incidences of violent rightwing crime had fallen during the first half of this year. But there appears to be little room for complacency across Germany, with about 10,000 incidents involving neo-Nazis recorded last year, including a number of attacks on foreigners.

On Sunday, a gang of 11 "drunken skinheads" attacked a black American man in Munich, police said. The man defended himself with a traffic sign until a police patrol car turned up. He was unhurt.

Police had originally investigated whether the Southern Brotherhood planned to attack the Oktoberfest beer festival in Munich, which starts next week. "One could [even] say there is a new quality of terror, though we know from previous times that in right-extremist circles bombing attacks were planned and carried out," Mr Schily said, referring to the 1980 neo-Nazi bombing of the Oktoberfest, which killed 13 people.